Satisfaction with the local grocery store mix: A consumer perspective

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1 Satisfaction with the local grocery store mix: A consumer perspectiveHarmen Oppewal (Monash University)Ian Clarke (University of Edinburgh)Malcolm Kirkup (University of Exeter)Supermarket Power in Australia Symposium,Melbourne, 1 August 2013Department of Marketing

2 UK grocery sector issues similar but further developed and more debated than in AustraliaConcerns over increasing concentrationSupply chain issues & accusations of abuse of powerTown centre v out of town locationsRole of the small store & supermarkets moving into the convenience sectorHomogenisation of high streetFood deserts debateOverseas entrants incl ALDI and WalmartPrivate labelsLoyalty cardsUnit pricingOrganic and local productsOnline channelConsumer concern and activismComp Commission investigations 2000, 2008Incl 2011 Portas review of high street

5 Aim and approach of this researchExplore what it means to have variety in the retail setting, what influences it, and how it affects consumer perceptions of choiceAssess how concentration, format diversity and proximity to stores influence satisfaction with the local store mixApproachConsumer satisfaction survey among consumers from different neigbourhoods, across different citiesRespondents rated their current neighbourhood’s provision and then completed a set of ‘stated preference’ tasks.

7 Stated preference study (Clarke et al 2012)Personal interviews across the population in one ‘average’ town in Mid England (Worcester) (n=288)Respondents evaluate hypothetical store mixes for their local areaLocal parade of shops within 5 minutesLocation at 15 minutes but near the town centreLocation at 15 minutes towards the edge of townPresence/absence of 8 individual stores varied across the three locationsTesco (3x); Sainsbury; ASDA; Morrison; SomerfieldTesco Express; Independent small retailerSatisfaction with store mix1=very unsatisfied, .., 5 = very satisfied

8 Stated preference task“Imagine your neighbourhood has a completely different range of food store available…”“How satisfied or dissatisfied would you be with this mix of stores” (1= very dissatisfied, 5 = very satisfied)

10 Findings Supermarkets at 5 minutes have largest contributionTesco more than SainsburyIf both present then joint effect is reducedOnly minimal contribution of small storesSmall effect for independent, does not depend on presence of other retailers; mainly reduces dissatisfactionNo effect for Tesco Express at 15 minutesEffects at 15 minutes vary by brand and locationASDA and Morrison larger effects than (second) TescoIf Tesco at 5 minutes then smaller effects of ASDA/Morrison

11 Main findingsConsumers are more satisfied if they have more grocery stores availableConsumers are more satisfied if they have a greater variety of brands and formats availablePublished as:Clarke I., M. Kirkup and H. Oppewal (2012), “Consumer satisfaction with local retail diversity in the UK: effects of supermarket access, brand variety, and social deprivation” Environment and Planning A, 44:

12 Extension (similar approach, separate sample)Role of online shoppingExtra condition varied presence of online channelNo significant effect: online is no substitute for brick and mortar store accessRole of discountersALDI adds significant benefit, but only if a main supermarket is also presentRole of premium storesWaitrose adds only modest amount

14 Next steps in the researchReal neighbourhood evaluationsEffect of actual store mix and access levelsComparison across two townsWith different levels of concentration

15 Study Areas Telford Milton KeynesOther research focused on most extreme cases - e.g deprived estatesWe’ve looked at ‘Middle England’ - more average scenariosGuided by the CC rankings from 2000 on concentrationNot a study of these towns in essence, but they provide a framework for accessing our neighbourhoods as Unit of AnalysisMilton Keynes

16 Retail supply in the two townsTown A = Telford:Low level of concentration of main supermarket brands (HHI<1500) and a Tesco market share of only 17%,Town B = Milton Keynes:High level of concentration (Herfindahl-Hirschman Index >3000) and a high Tesco market share of 52% (at time of surveying)Approximately 20 supermarkets and 50 small local supermarkets and convenience stores in each townAll main competitors presentSimilar presence of discounters and of high end luxury supermarkets

17 Illustrates what local dominance can mean - for those of you not familiar with the MK situationHad opportunity to look at area where Tesco is highly representedInterested in how consumer sees dominance - effect of local competition on choice

19 Methodology Careful selection of nine local areas in each town60 face to face interviews in each area to collect consumer evaluations of the retail supplyLocation data for all supermarkets combined with travel time data for all area postcodes.Resulted in each respondent’s available set of stores, including their brands and travel times.Selected nearest six supermarkets for each respondent

23 Independent variables: Store mix across six nearest supermarketsX1= travel time to nearest supermarket;X2= extra travel time to the next (third) nearest supermarket;X3= proportion (presence) of discount stores among the respondent’s six nearest stores;X4= proportion of ‘high end’ stores among the respondent’s six nearest stores;X5= proportion of main party supermarkets among the respondent’s six nearest stores;X6= proportion of Tesco stores within the selection of main party supermarkets.X7= dummy variable for whether the householder has a car available more than 3 days a week for shopping;X8= Town dummy

25 Analysis: mixed linear regression18 neighbourhoods as groups, each has random interceptNull model (only random intercepts) has intragroup correlation coefficient of .25.The model is significant (Chi-2(7) = 42.59, p<.001) and explains 27% of the between group variance and 2% of the within group variance.No improvement when including distance and store mix variables as random slopes (after within-group mean centering).25 intra class correlation 25% of the variance in sat scores is attributable to between group (neigbhourhood) differences27% between group var vs only 2% within group varianceSo huge multilevel effect! – but not surprising.

27 Results (1) Distance to nearest supermarket: no effectBut negative effect of distance to next nearestSo it is the access to multiple supermarkets in the vicinity that is importantVariety: Presence of a discount store increases satisfactionNo effect of the presence of a high end storeSo the effect is due to discounter availability, not mere variety

28 Results (2) Proportion of Tesco’s negatively affects satisfactionConsumers are more satisfied when there is more brand variety among the main supermarketsRespondents in Low Concentration town more satisfied than those in HC townThe High Concentration town also included more Tesco branded convenience storesHigher satisfaction if car availableNo interaction with distance variables

29 ConclusionsConsumers in the town less dominated by Tesco significantly more satisfied with their local mixSatisfaction does not depend on distance to the nearest supermarket; instead it depends on the combined distances to the set of nearest storesConsumers value brand variety and discounterPolicy makers should focus on variety, not just on providing ‘minimal’ access levelsBut there may be vulnerable subgroups who need accessNo indication that online can provide a substitute

30 Do these findings transfer to the Australian context?Yes, in principle, –But differences to noteNumber of competitorsRegulatory environment…Still an open research questionResearch pendingPartnering (Monash):Higher levels of concentrationHigher dependence on car

32 Satisfaction with the local grocery store mix: A consumer perspectiveHarmen Oppewal (Monash University)Ian Clarke (University of Edinburgh)Malcolm Kirkup (University of Exeter)Supermarket Power in Australia Symposium,Melbourne, 1 August 2013Department of Marketing

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